C-12/73

and

Hauptzollamt HAMBURG-JONAS,

defendant

on the interpretation of Article 15 of Regulation No 121/67/EEC of the Council of 13 June 1967, and Article 6 of Regulation No 1041/67/EEC of the Commission of 21 December 1967, and on the interpretation of tariff heading ex. 16.01 B 1 a) and c),

THE COURT

composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, H. Kutscher, C. Ó Dálaigh, M. Sørensen and Lord Mackenzie Stuart (Rapporteur), Judges,

I — Facts and procedure The customs authorities took samples of the sausages and, in their decision of 29 The facts and procedure in the case may April 1968, granted an export refund to be summarized as follows: the applicant for products classed under Article 15 (1) of Regulation No sub-heading, 16.01 B I a), of the 121/67/EEC of 13 June 1967 on the Common Customs Tariff (sausages and common organization of the market in the like, containing meat or offals of pigmeat (OJ No 117, p. 2283) provides swine intended for human consumption), that a refund equal to the difference calculated in accordance with Regulation between quotations on the world market No 222/68/EEC of 23 February 1968 and prices within the Community may (OJ L 49, 27. 2. 1958, p. 5). be granted on export to third countries At the rate of 1-80 DM per kg, the total of products falling under heading c) ex. amount of the refunds thus granted to 16.01 (sausages and the like, of meat, the plaintiff in the main action amounted meat offal or animal blood, containing to 195 762-42 DM. meat or offals of swine) of the Common According to an experts opinion on the Customs Tariff. samples taken, dated 12 May 1968 and Under Article 15 (6) of the above made at the request of the customs Regulation the Council adopted in its authorities, these were 'a product Regulation No 177/67/EEC of 26 June manufactured from fat and the lowest 1967 general rules for granting export grade of meat offal'. The merchandise refunds and criteria for fixing the cannot be described as sausage because a amount of such refunds (OJ No 130, p. vital ingredient, namely meat, is absent. 2614). In the home customs territory, this Article 6 of Regulation No 1041/67/EEC produce would not be marketable as of the Commission of 21 December sausage, and if put on the market it 1967, applying detailed rules for the would be treated as a flagrant application of export refunds on misrepresentation under Article 4 (2) of products subject to a single price system the Food Law. Moreover, this (OJ No 314, p. 9) provides that: merchandise, on account of its 'A refund shall be granted only in respect distinctive odour und taste, would have of products in free circulation within the to be the subject of a complaint as being Community which are of sound and fair rotten and unfit for consumption. marketable quality and, in the case of The defendant thereupon by decision of products intended for human consump­ 9 May 1968, claimed repayment of the tion, which have characteristics or are in refund granted, quoting Article 6 of a condition such as do not exclude or Regulation No 1041/67/EEC of the substantially impair their use for that Commission of 21 December 1967. purpose.' The applicant had purchased the On 22 April 1968 Claus W. Muras, a sausages exported at a price of 1-10 DM merchant of Buchholz in Germany to 1-28 DM plus 5 % VAT per kg. The applied for a refund from the defendant sale price of the goods sold to a for 108 756-9 kg of 'Rohwürste' (a Yugoslav undertaking was approximat­ certain kind of sausage) exported to ely 0-20 DM per kg. The applicant had Yugoslavia. had to pay 0-12 DM per kg agent's

(a) Is the requirement imposed by Arguments of the parties to the main Article 6 of Regulation No 1041/67/EEC of the Commission action before the national bodies of 21 December 1967, that the The plaintiff in the main action claims exported products must be of that sausages can be made entirely of sound and fair marketable quality offal. The quality is sound and and, in the case of products marketable if the product can be offered intended for human consumption, for sale in normal conditions. In this that they must have character­ context the relevant conditions are those istics or be in a condition such as of the market of the recipient country. do not exclude or substantially As regards the price obtained, the impair their use for that purpose, applicant's opinion is that EEC law to be determined to the market makes no distinction based on the conditions and the foodstuffs quality of the product exported nor on legislation of the EEC Member the cost price and sale price, nor even on States, or according to those of the exporter's business calculations. the recipient country outside the He maintains that the profits made on EEC? export should not be any criterion with (b) In interpreting the requirement, regard to the right to a refund. Were it mentioned under (a) above, of otherwise, refunds could only be granted Article 6 of Regulation No subject to submission of the exporter's 1041/67, must it be assumed that balance-sheets and business calculations.

MURAS v HAUPTZOLLAMT HAMBURG-JONAS

The question exclude the possibility that where the whether or not these sausages are fit for purchase price paid for the goods human consumption must therefore be exported is extremely low, it may be determined according to the foodstuffs necessary, in the course of the refund legislation in force in the national procedure, to examine the question territory. It would be absurd to suppose whether it is in accordance with the that the European Economic Community spirit and purpose of Article 15 of subsidizes exports of offal for which Regulation No 121/67/EEC to grant an there is no market in the Community. export refund when its amount exceeds During the first half of 1968, the world the purchase price of the product market price for sausages and dry saus

When Article 15 of Regulation No price of approximately 0-20 DM per kg. 121/67/EEC states that the difference The refund, on the other hand, between quotations may be covered by amounted to 1-80 DM per kg. an export refund, this can in the context only be understood to mean that the higher domestic price of the Community On the second question may be reduced to the world market (a) The relevant conditions, in the price level by means of an export refund opinion of the Hamburg Finanzgericht, and the second recital is to the same are not those which exist in each

below zero. Community price to the level of the Of course, Article 15 (1) of Regulation world market price it must be assumed No 121/67/EEC is not in fact concerned that the quality of the sausages exported with domestic prices. Export refunds are is such that they will reach on the world not granted by reference to the market a price which, taking into account manufacturing cost price which has to the export refund, will be higher than be substantiated in every individual zero. instance, or to the quotations and prices current on the world market.

JUDGMENT OF 9. 10. 1973 — CASE 12/73

The classified as sausages and the like, for explanatory notes to the customs tariff example because no pigmeat is present, of the European Communities, based on it is necessary to know whether they can Regulation No 97/69/EEC were not be classed under tariff heading (c) published until after the date of export, 'other'. the decisive date in this case. The order containing the reference was According to Margin No 3 of the lodged at the Registry of the Court on Brussels explanatory notes, the principal

The Commission of the European and the like are also expressly mentioned Communities was represented by its as being derived products. According to the Finanzgericht this means that hams legal adviser, P. Kalbe. and shoulders are to be included among the typical ingredients of sausages and the like. The amount of the refunds laid II — Observations under Ar down in Regulation No 222/68/EEC ticle 20 of the Statute makes it appear that sausages and the like are to contain not only offals of The observations submitted to the Court swine but also a substantial proportion may be summarized as follows: of high quality pigmeat. The refund rate of 45 u.a. per 100 kg of sausages and A — Observations of the Commission the like is considerably higher than that for liver sausage, 11-20 u.a. per 100 kg, On the first question and half as much again as that for products other than sausages and black The Commission points out that the

When the refund rates for sausages are are fundamentally different from the being fixed, the Commission is issues which fell to be decided in Case 13/72. Deliveries effected on behalf of a reasonably well-informed of general Member State within the framework of price levels for basic products, as well as their prices inside and outside the food aid are quite a different matter Community. It is therefore in a position from exports where goods are sent to fix refund levels, on the basis of the beyond the Community frontiers solely in order to obtain the refund. average quality of current products, in such a way that there is in general no The issue in this case is clearly one of obvious disproportion between the the abuse both of the legislation — refund and the price of the lowest having regard to the purposes for which quality products currently available. The it was intended — and of common legal requirement that the products be 'of institutions. sound and fair marketable quality' is a useful but not always sufficient, safeguard against abuse. On the second question

doubt that in interpreting this Community is it necessary to Community nomenclature, only classifi­ compensate for the differences in prices cations recognized by Community law as against the world market, in order to and the particular modes of enable Community products to be interpretation appropriate to this end are exported. relevant. The customs treatment of goods The Commission has therefore concerned in the recipient country is concluded that the concept of 'sound quite irrelevant. and fair marketable' quality, and the principle of unrestricted fitness for The Community legislature also defines consumption, imposed by Article 6 of products capable of benefiting from a Regulation No 1041/67/EEC, must be refund according to their quality. Those interpreted solely on the basis of criteria provisions which relate to quality are applicable within the Community. also undeniably independent rules of Community law, with their own (b) The Commission points out that intrinsic value, and are to be applied, cost prices on the domestic market, thus irrespective of any concepts relating to constitute for sausages and the like one quality in the recipient countries. The of several criteria in deciding whether in requirement of 'sound and fair this instance, the goods are of marketable' quality imposed by Article 6 marketable quality: any unusual dispar­ of Regulation No 1041/67/EEC is a ity between the price of goods exported provision relating to quality. It would be and current prices can be a reliable an unjustifiable irrelevance to make the indication — as experience of daily life determination of the characteristics of shows — that the quality is no longer quality uniformly required by the marketable. Community legislature by reference to Significant price advantages can be the criteria applicable in the Community gained only by increasing the fat or in third countries, depend on the content. If the fat content is increased more or less precise formulation of the considerably, the quality of the Community provisions on the subject. merchandise is automatically diminished. The concept of sound and fair The same applies also where dearer meat marketable quality must therefore also is replaced by much cheaper offal. be interpreted by reference to the criteria applicable in the Community and not according to the ideas of On the third question recipient countries. In its statement, the Commission first When Article 6 refers to use of a product sets out the development of tariff for purposes not limited to human heading 16.01. In Germany the notion of consumption, the Community legislature 'Rohwurst', is derived from a is laying down the minimum comparison with the categories 'Koch-, requirements relating to the nature of Brüh-, and Bratwürste'. These are the products exported. It is possible to sausages and the like made from arrive at an evaluation of such concepts untreated meat which is 'not pre-cooked' on the basis of the situation as it exists and fat, with the addition of seasoning, in the Community. and which, owing to the drying and

bacterial maturation which they have preservation if composed entirely of undergone, are edible as they are, that is, offal. Moreover, the difference between without further treatment (as sausages to the rates of refund for these sausages be spread, or eaten in slices). and for 'other' can only be explained by When, in the context of the common the presence of a higher meat content. organization of the markets it became The addition of water is incompatible necessary in the sector of pigmeat to with the concept of dry sausage. distinguish sausages and the like by quality, for example 'salami' and others, Drying in air is of course one of the the expression 'Rohwurst' known to most common processes of bacterial German terminology and defined maturation, but is not the only one according to reasonably objective possible. standards, appeared to be the expression A dry sausage must not be made solely which best answered both economic of fat but must also contain meat.

The only 'saucisses et saucissons secs ou a tartiner, requirement for this classification is that non cuits'. The Italian text contains such sausages be 'destined for human terms similar to heading 16.01 with the consumption' and fit therefor. words: 'salsicce, salami e simili. . .' and under sub-heading B1, with terms already used in Regulation 222/68/EEC, B — Observations of the plaintiff in the 'salsicce e salami, stagionati, anche da main action spalmare non cotti'. The original Dutch text 'Worst van alle soorten' becomes 'gedroogde worst en smeerworst, niet On the first question gekookt en niet gebakken'. As far as the tariff classification is The plaintiff in the main action points out that to refuse export refunds where concerned, the Commission reaches the the exporter has purchased his basic ma following conclusions: terials at an excessively low price would

At the time there was preparation does not involve cooking and the ingredients are neither a surplus of bacon owing to the cooked nor treated beforehand. unpopularity within the Community of products with a high calorific content. The term 'Rohwurst' also applies to This affected the price of lean meat, and sausage which has to some extent been so the Community had an interest in preserved by natural maturation getting the surplus exported. The (bacterial). plaintiff therefore believes that the first A sausage must contain meat because it question should be answered in the will not reach the necessary state of negative.

Grounds of judgment

1 By Order of 25 January 1973, lodged at the Registry of the Court on 21 February, the Hamburg Finanzgericht referred a number of questions, pursuant to Article 177 of the EEC Treaty, on the interpretation of Article 15 of Regulation No 121/67/EEC (OJ No 117, p. 2283/67), of Article 6 of Regulation No 1041/67/EEC (OJ No 314, p. 23), of sub-heading 16.01 B 1 a) and c) of Annex II to Regulation No 137/67/EEC (OJ No 122, p. 2395) and of the Annex to Regulation No 222/68/EEC (OJ 1968, L 49, p. 5).

On the first question

2 The first question asks the Court to say whether Article 15 of Regulation No 121/67/EEC is to be interpreted as meaning that an export refund cannot be

MURAS v HAUPTZOLLAMT HAMBURG-JONAS

granted if the amount of the refund exceeds the price in fact paid for the exported product (in this case, a batch of sausages) on the home market.

The seventh Recital of the abovementioned Regulation lays down that only products in free circulation within the Community can benefit under the arrangements provided by that Regulation, and that moreover exported

JUDGMENT OF 9. 10. 1973 — CASE 12/73

products must be of such a quality that they can be marketed on normal terms.

It transpires from the grounds given by the Hamburg Finanzgericht that the problem at issue is whether this requirement must be interpreted as an implicit reference to the health regulations of the third countries to which the products are exported or to regulations in force within the Community.

7 In the absence of any express reference to the laws or customs of a third country a Community provision must be interpreted in relation to and in the context of its own sources.

The refund system is instrumental in the common organization of markets for the purpose of achieving the objectives set by Article 39, and in particular the stabilization of the Community market provided for by Article 40 (3) and by the fifth Recital of Regulation No 121/67.

11 These questions, being closely connected, will be examined together.

12 This requirement, contained in Article 6 of Regulation No 1041/67, constitutes a general, objective condition for the grant of a refund, whatever the requirements as to category and quality laid down by the Regulations fixing the amounts of refund for each product.

A product which could not be marketed within the Community under normal conditions and under the description given in the claim for the grant of a refund would not meet these requirements as to quality.

The fact that the amount of the refund exceeds the price in fact paid by the exporter on the home market for the product exported is an indication that doubts should be cast on the quality of the product.

On the second part of the third question

13 The second part of the third question is principally concerned to obtain the proper interpretation of the descriptions of the goods designated 'sausages and the like' and 'other', within the meaning of Annex II (c) ex. 16.01 B 1 a) and b) of Regulation No 137/67/EEC of the Council of 13 June 1967 and that of the Annex to Regulation (EEC) No 222/68 of the Commission of 23 February 1968.

15 The classification of a product under sub-heading 16.01 B 1 a) presupposes that its ingredients have beens subjected to a drying process and that moreover they are composed of meat, not merely of offal.

16 Sub-heading 16.01 B 1 c) is a residual heading in which are classified all sausages and the like and other similar products composed of meat, offal or blood, within the meaning of the abovementioned explanatory notes, which cannot be included under the other headings.

Costs

17 The costs incurred by the Commission of the European Communities, wich has submitted observations to the Court, are not recoverable and as these proceedings are, insofar as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the observations of the plaintiff in the main action and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Com­ munity, especially Article 177; Having regard to Regulation No 121/67/EEC, especially Article 15; Having regard to Regulation No 1041/67/EEC, especially Article 6; Having regard to Regulations Nos 137/67/EEC and 222/68/EEC; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20;

3. The classification of a product under sub-heading 16.01 B 1 a) presupposes that its ingredients have been subjected to a drying process and moreover that they are composed of meat, not merely of offal.

Lecourt Monaco Pescatore Donner Mertens de Wilmars

Kutscher Ó Dálaigh Sørensen Mackenzie Stuart

Delivered in open court in Luxembourg on 9 October 1973.

A. Van Houtte R. Lecourt

Registrar President